The Next Hurricane-Related Shortage: Construction Workers

A severe shortage of construction workers is expected to cause widespread delays and push labor costs sharply higher as Texas begins to rebuild from Hurricane Harvey.

The labor squeeze could get worse still if Hurricane Irma slams the Southeastern U.S. this weekend as expected.

Already, an estimated 30,000 homes in Houston were destroyed by Harvey, more than this city was expected to build in all of 2017, according to the Greater Houston Builders Association. Tens of thousands more were damaged.

The spike in construction demand comes at a time when contractors say they already are facing delays of one to two months to find workers for their projects. Now those wait times to could grow to many months, they said.

Wages and material prices also are expected to rise, potentially by double-digit percentages, based on the historical example of Hurricane Katrina in 2005, according to real estate tracker John Burns Consulting.

"It's going to be a monumental challenge that is going to be frustrating for people who just want to get their lives back," said Scott Norman, executive director of the Texas Association of Builders.

Dan Bawden, president and chief executive of Legal Eagle Contractors Co., said he has been getting so many calls, emails and texts that he has been working until midnight seven days a week. He expects to reject four out of every five inquiries he receives to rebuild people's homes.

In low-lying Meyerland, Texas, where Mr. Bawden primarily works, soccer trophies and family photos are still piled on clients' lawns, and it will take a month for their homes to dry out. Contractors will be stockpiling drywall and interior doors the way most people load up on milk and eggs before a storm, he said.

Mr. Bawden is taking jobs in a limited geographic area so that as the rebuilding ramps up, he can go from house to house installing drywall and replacing doors all at once, he said.

Before Harvey, construction workers across the U.S. were already in tight supply and material costs were rising. Houston is likely to face such a severe crunch that it could affect the national economy by pushing up material costs and driving down the U.S. unemployment rate for construction workers further, according to Robert Dietz, chief economist at the National Association of Home Builders. There were 225,000 unfilled construction jobs in June, near the recent high of 238,000 recorded in July 2016, according to a National Association of Home Builders analysis of Labor Department data.

In all, 10,000 to 20,000 workers could be needed to rebuild the homes damaged by Harvey alone, or 10% to 20% of the total number of residential construction workers in the Houston metropolitan area, according to the National Association of Home Builders.

After Katrina, construction-worker wages in Mississippi jumped 12%, according to an analysis by Todd Tomalak, vice president of research at John Burns Consulting. The number of new housing permits increased by about 27% from 2006 to 2007 in the New Orleans area, according to the analysis.

Juan Hernandez tracked Harvey's progress carefully from his home in Los Angeles until Sunday night, he said. Then he packed up his 26-foot truck with 60 dehumidifiers, loaded eight employees into a pickup and headed to Houston. He has been working nonstop ever since, he said.

On Wednesday he was standing in line inside a Home Depot in West Houston waiting to pay for a pallet of fans and some vents.

"We're so busy I don't have time to think," he said, between incoming calls on his two phones. "There's a lot of work here. A lot."

Mr. Hernandez is charging customers $85 an hour for the labor for his men, up from his usual rate of $55 an hour. The bump comes because he is paying them $160 a day plus room and board, up from $100 a day.

"Nobody blinks at the prices," said Mr. Hernandez, who specializes in fire and water restoration. "They just want [the work] done."

After Hurricane Katrina thousands of construction workers descended on New Orleans to help with work and ended up staying because the rebuilding process lasted years.

After the housing bust, many construction workers left the industry and never returned. At the same time, young people are largely eschewing a profession that can involve risky, backbreaking work in all kinds of weather. Builders said tighter immigration policies also could contribute to the squeeze.

Lumber and drywall prices were up in 2017 before Harvey, and prices are likely to shoot higher, especially if Hurricane Irma makes landfall in the continental U.S., according to Mr. Dietz.

Augie Bering, owner of two hardware stores in Houston, said he has struggled to keep up with the spike in demand since the storm ended. The stores, each about 30,000 square feet, typically take one delivery a week that fills up part of an 18-wheeler. Since the storm they have taken a full load every day.

"We're having a hard time keeping up with dehumidifiers, protective masks, respirators, work gloves, that's all been hard to keep in stock," Mr. Bering said.

Instead of taking deliveries from a warehouse in Waco, the stores are taking deliveries straight from manufacturers, said Mr. Bering.

Beyond obtaining goods, the company is struggling to bring in the manpower the stores need to unload all it all. Closed roads have extended employee commutes from a half-hour to two hours in some cases. Volunteers have helped unload 18-wheelers.

A spokeswoman for Lowe's Cos. said the retailer is meeting the increased demand for Sheetrock and building materials in the wake of Harvey. Stores are receiving at least one truckload of Sheetrock and multiple truckloads of other materials each day in the area.

Home Depot Inc. also is meeting the demand for Sheetrock and building supplies, a spokesman said. The retailer's trucks started delivering supplies last week and merchant and supply chain teams have been working since to keep up. Now they also are working Irma, a spokesman said.

Sarah Nassauer contributed to this article

Write to Laura Kusisto at laura.kusisto@wsj.com and Douglas Belkin at doug.belkin@wsj.com

(END) Dow Jones Newswires

September 07, 2017 11:42 ET (15:42 GMT)